Strong demand to keep milk product prices high, says Fonterra

New Zealand's Fonterra, the world's largest dairy exporter, signalled that robust demand from China, Latin America and Southeast Asia would keep milk product prices near historical highs in the coming season.

In a country where dairy exports account for a quarter of all exports, high milk prices and solid payouts to dairy farmers have been a boon to economic growth and supported the New Zealand dollar.

Fonterra's payout to its farmer shareholders for the season that winds down this month was finalised at NZ$8.40 (HK$55.70) per kilogram of milk solids - the highest since the dairy cooperative was formed in 2001.

Higher production around the world has pressured global dairy prices in recent months, prompting Fonterra to set its initial forecast for the coming season at NZ$7, but that may be revised upwards in quarterly updates if China's appetite for milk formula and other dairy products grows, as the company expects it to.

"We're still looking at good prices for the milk powders," chief executive Theo Spierings said.

New Zealand's milk powder exports to China doubled to NZ$4 trillion last year, and Spierings said exports could still grow if Fonterra's payout for the coming year was around NZ$8.